Russians are pulling cash out of banks. How likely is the deposit freeze they fear?

Russian citizens are withdrawing money from banks at an accelerated pace due to rumors of a potential deposit freeze. The Washington Post reported on this issue last week, linking it to the increasing amount of cash in circulation. Russians have been shifting their savings to physical cash since the fall of 2024, with outflows becoming particularly heavy this year.

According to Sber Chief Financial Officer Taras Skvortsov, the amount of cash in circulation has grown by over 10% since the beginning of the year, reaching more than 3.8 trillion rubles. Skvortsov described July as the worst month for banks in terms of outflows in the past six years, with a liquidity shortage quadrupling since the start of 2026.

The growing cash holdings have raised concerns about the potential impact on banks' ability to issue loans and buy government debt, which is crucial for the government as the budget deficit grows. Economist Yevgeny Nadorshin warned that a decline in deposits could lead to fewer mortgage loans being issued, affecting millions of families.

However, the situation is not yet catastrophic. Russian banks are resilient and can cover their liquidity shortfalls through transactions with the Central Bank. The liquidity deficit, currently at 2.6 trillion rubles, remains far from the projected range of 2.4 trillion to 3.6 trillion rubles by the end of 2026.

While the cash outflow is a sign of economic activity moving underground, the situation is still manageable. The Central Bank has stated that it does not disrupt banks' day-to-day operations. The risk of a deposit freeze remains low, as the authorities are addressing budget issues through monetary policy. However, if the war persists, the economy's problems will likely worsen, leading to a gradual decline in the standard of living for Russians.